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Expensive services hike core inflation to 7 per cent

Expensive commodity. Sugar prices have reached Shs7,000.

Kampala. High cost of services in the country has driven Uganda’s core inflation to 7 per cent up from 6.4 per cent over the last one year. This implied the general public had to make adjustments to their budgets to access the goods and services they needed.
Uganda Bureau of Statistics (Ubos) said on Tuesday the increase in annual core inflation is due to a rise in annual services inflation which rose to 6.5 per cent for the year ending May 2016, compared to 5.9 per cent increase that was recorded during the year ended April 2016.

Releasing the Consumer Price Index (CPI) at Statistics House, the director macroeconomic Ubos, Dr Chris N. Mukiza, said the rise in Uganda’s annual core inflation was also caused by increases in costs of other goods inflation which rose by 7.4 per cent during the same period.
“The cost of services has shot up over the last one year, which has contributed to the rise in the annual core inflation,” Mr Mukiza said.
The annual core inflation excludes food crop items, metered water and energy from the CPI basket of goods because these items are considered to be veryvolatile.

On the other hand, the annual headline inflation which includes everything in the CPI basket for the year ending May increased to 5.4 per cent compared to the 5.1 per cent recorded during the year ended April 2016.
Dr Mukiza said the driver of the annual headline inflation upward was contributed by the rise in core inflation.
The CPI figures show that during the period, annual energy, fuel and utilities inflation decreased to 5.6 per cent for the year ending May compared to the 5.1 per cent recorded during the year ended April 2016.

Similarly, the CPI figures show that the food crops and related items inflation decelerated to 5 per cent for the year ending May 2016, compared to an earlier deceleration of 4.2 per cent recorded during the year ended April.
Bank of Uganda (BoU) uses the core inflation to control Uganda’s inflation at 5 per cent but does not control the inflation rate using monetary policy tool like the Central Bank Rate (CBR).
BoU will be issuing a monetary policy statement during the course of the month to announce whether it is increasing the CBR or leaving it unchanged.

Under control
Even with the slight edge up, inflation still remains within range. Policy makers will draw a lot of comfort from this and therefore hold the view that the Central Bank is likely to keep the policy rate unchanged at the upcoming policy meeting - Stephen Kaboyo, managing director Alpha Capital.